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Mortgage Regulations

12 December 2017

For a few years now, following the Government’s overhaul of the mortgage market, known as the Mortgage Market Review (or MMR), much tighter mortgage application regulations have been in force.  In addition, this year’s further tightening from the Bank of England focused on enforcing stringent new stress tests for banks when assessing a person’s mortgage affordability.

There are five key areas where mortgage applicants, including people re-mortgaging an existing property, are feeling the effects of these regulations most acutely:

1.  Obtaining a “Decision in Principal” will now take much longer as Mortgage Advisors need to ask more questions to determine what mortgage product is suitable, taking into account the applicant’s personal circumstances in detail.  Mortgage interviews could take longer than expected and may even be split into two separate interviews.

2.  Lenders must assess the future affordability of mortgages, as well as initial payments, by applying an interest rate “stress test” – to ensure that the loan would still pass affordability requirements when interest rates eventually rise.

3.  Lenders also have to consider the impact of possible/known future lifestyle changes such retirement or redundancy, when assessing affordability.

4.  There is now greater scrutiny of a borrower’s expenditure. For example, the impact of school fees or holidays as well as day-to-day groceries will be taken into account and borrowers may need to produce more evidence of their spending habits.

5.  Interest-only mortgages are now harder, but not impossible, to obtain, as borrowers must be able to demonstrate a credible repayment strategy to repay the loan at the end of the term.

However, if you’re a vendor client of Grace & Rose Estate Agents, you can sleep easy, as we will always ensure that any offers that we submit to you are from buyers who are well-qualified with a Mortgage Decision in Principal in place, as it is now more important than ever to know, in advance, that the buyer’s mortgage application stands the best possible chance of being approved before a purchase is even agreed.

Dean Caldon

Managing Director

Grace & Rose Estate Agents

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